UPDATE 1-Auto task force members say were not aware of GM's faulty ignition switch

Wed May 21, 2014 5:16pm EDT

(Recasts, adds Rattner comments in paragraphs 4-5, 10-11)

By Eric Beech

WASHINGTON May 21 (Reuters) - Two former members of the U.S. auto task force that helped restructure General Motors Co in 2009 during its bankruptcy said they were not aware at the time of the defective ignition switches linked to at least 13 deaths.

Harry Wilson, speaking at a conference in Washington, said the task force on which he served never met with lower level GM engineers, adding that the crisis brought on by the faulty switch showed the cultural problems at the largest U.S. automaker.

"We didn't know about anything like this," he said of the defective part. "It seems to have been basically stuck at the mid-level of the engineering department and not risen above that," Wilson said at an event hosted by the Brookings Institution.

Steven Rattner, who headed the task force, said his group would not have learned about the problem unless someone at GM had told them.

"We were not forensic accountants. We were not FBI investigators. We had about 40 days to do all this due diligence. We're not going to find something like that out unless people tell you," he said after the Brookings conference.

GM last week was fined a record $35 million by the U.S. National Highway Traffic Safety Administration for its delayed response on the faulty switch, which engineers first discovered in 2001. The company still faces probes by the U.S. Department of Justice, Congress, the Securities and Exchange Commission and several states about how it handled the issue. GM also expects to complete an internal probe within two weeks.

Wilson said the defective ignition switch and resulting recall of 2.6 million vehicles globally showed that decisions at the company were previously driven by the company's weak financial condition as well as various departments, such as legal and engineering, not communicating well with each other.

"It is sadly emblematic of the cultural problems at the company," he said of GM. "They would do anything to save a penny, including some really bad decisions both economically and morally.

"From what I can tell, as evidenced by the fact that the recall didn't become public until very recently, that still persists, and that is something that has been a problem at General Motors for decades that Mary really needs to attack," Wilson added, referring to GM Chief Executive Mary Barra.

Rattner said the culture of GM had changed for the better but "not as much as it needs to change."

"There is still clearly work to be done. I think Mary Barra would be the first to say that," he said.

Wilson said he thought GM's stock was "woefully undervalued." GM's shares closed up 1.2 percent at $33.46 on Wednesday. (Additional reporting by Ben Klayman in Detroit; Editing by Andrew Hay and Ken Wills)

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